Today's list (What I may purchase)

AGQ at 148; target 156

INDL 36.2; BSE at very strong support. At least a bounce here. HSI is also at very strong support.

TNA 77.5?

Short GBP

SP will double top at 2007 highs

SPX will double top. That’s when the bear market will start.

Next serious pullback when the RUT double tops. For now, long RUT.

Plan to get long TNA today and tomorrow. Also looking at INDL long.

Best Method For Trading

(For me)

1. Find individual stocks that are the best patterns. Find optimal entry. Set buy order. Find exit. Set sell order. 5-15% moves.

2. At all costs, avoid shorting bull markets, except as a hedge, with a small position.

3. At all costs, avoid going long bear markets; same rules as #2.

4. Avoid shorting or going long indices. Find individual equities in pullbacks from the major trend. Remember, in a bull, individual equities (and even sectors) may double or triple while the overall index moves up by 10%. Don't be afraid of the work. If you can't find individual equities to go long/short, that means you shouldn't go long/short. Maybe the trend is changing or there will be a reversal soon.

5. Maintain 2-4 different positions. Don't put all capital into one position. This enables you to move on from one losing position. Always be looking for other positions; other equities.

6. Always know the exit point -- or where you will exit this trade if things don't work out.

7. Plan to make money in the long-term. No doubling in two weeks.

Barry Ritholtz on Shorting

from The Big Picture (www.ritholtz.com)

Basic Rules for Shorting Stocks

1. Shorting Momentum names is dangerous: Unless you are Superman, never step in front of a speeding locomotive

2. Valuation alone is insufficient reason to get short a stock — History teaches us that cheap stocks can get cheaper, dear stocks can get more expensive

3. ALWAYS work with a pre-determined loss – either a physical or mental stop loss — Never leave yourself open to infinite losses

4. Fundamentals tell you WHY to short something, not WHEN to short it. ALWAYS have some technical confirmation before shorting. Make a short selling wish list, then WAIT for technical confirmation. (We use Money Flow, Short Term Trend lines, Institutional Ownership, Analyst Ratings).

5. It is tough to be a contrarian: During Bull and Bear cycles, the Crowd IS the market.

You have to figure out two things:
…a) When the crowd is wrong — Doug Kass calls it “Variant Perception”
…b) When the crowd starts to get an inkling they are wrong

At the turns — not the major trends — is where contrarians clean up.

6. Look for Over-owned, Over-loved stocks: 95% Institutional ownership, All buys or Strong Buys (no sells), and 700% gains over the past few years are reasons to put names on your short selling wish list. (That is how my partner Kevin Lane found and shorted Enron and Tyco back in the 1990s).

7. Beware the “Crowded Short“– they tend to become targets of the squeeze!

8. You can use Options to either juice your short returns, or pre-define your risk capital (options)

Update

Out of 3/5 of short position at ES 1290; Still long Silver

Case 1 30% probability

The bear case:

ES 1310 is very strong overhead horizontal resistance. Look at a 3 year weekly chart.

NDX was rejected at 38.1 retrace of entire 2000-2008 bear market. NDX and GOOG charts look tired; time for a break.

Dollar is charging, finally.

Rally is very long in the tooth.

Daily RSI on the NDX is indicating a negative divergence. SPX too, but NDX is more clear.

Earning season over - sell the news.

Case 2: 45% probability

The bull case:

However, equity PC data is indicating a ST BOTTOM.

We may be making a bull flag under major resistance.

And a LOT of people seem to be waiting to get long.

And this is a godawesome bull market.

This may be the last leg up before the pre-summer fall.

Case 3 25% probability

I think there is also a possibility we see 1315 then a fall.

Plan now? See reaction to employment report. Prepare to take a loss on the remaining short.

Update

Will probably get out of shorts on a pullback. Still like Silver.

Update

SP may climb to 1290 and possibly double top at 1300. IWM will hugely diverge.

/DX is still weak, thanks to QE. This should put a bid under the larger caps, but not as much under the small caps.

I am short the Russell from ES 1283, after getting out of earlier shorts circa ES 1274.

Short until 1245-50 zone

I plan to stay short until 1245-1250 on the ES.

I am short via TZA. Sold IWM puts at 1274 ES but will buy again at about 1283.

Market Update

SPX down to at least 1235 or so.

Wave A down to ES 1261.

Wave C to 1235.

Gold up to at least 1375 or so.

AGQ 134 at least.

NDX may have peaked. Possible. Nice short for now.

SPX will double top (with 2007 top) this year or early 2012.

In mid Feb go long.

Next Month

1. Equities:

- I see a small bounce in the week ahead, then a 50 point drop in the S&P, probably from 1280 to 1230. Drop should start around AAPL earnings.

- From 1230, I think we rise to 1330 or so by March-April.

- In March-April, I think we start a 1.5 year bear market in the United States.

- Problem is that this is against the Presidential cycle, so I'm not yet sure on the bear market. Maybe we get an extended Wave 5?

2. Silver/ Gold: I am buying this correction with AGQ in the 138 level. I see us going up from here.

3. BSE can be safely shorted up to 18500 at least. Then we will get a big bounce.

Some of my Trades:

1. Long AGQ 138

2. Looking to short India (long INDZ at 26.2 or so).

3. Looking to short SPX (long BGZ at $8.4 or so).

Took profits on a quick long EDC trade this morning.

Took profits on short Silver trade.